Japanese IT firm Fujitsu has announced a plan to spin off their mobile device business into a separate company. Under the deal, investment firm Polaris will take over management and assume control of 70% of the company, while Fujitsu will retain a 30% stake. While Sony is the largest Android device manufacturer in Japan, Fujitsu is also a major contender. Fujitsu’s Arrows series of smartphones and tablets are available primarily on NTT Docomo, the largest mobile network operator in Japan.

In addition, Fujitsu produces the “rakuraku” series of smartphones intended for senior citizens for NTT Docomo, as well as unlocked devices for use with MVNOs. Previously, Fujitsu products were also available on Softbank and au, though this seems to have ended in 2014. Fujitsu phones and tablets have historically been manufactured in Japan. While the manufacturing facilities are included in the sale to Polaris, it is unclear if future products will continue to be manufactured domestically.

Separately, it seems entirely plausible (if not outright likely) that this move may be a first step to merging the mobile device business with a different company. In 2016, negotiations between Fujitsu, Toshiba, and Vaio Corp. (which was spun off from Sony in 2014) aimed to merge the PC and Windows tablet divisions of the three companies, though a deal ultimately failed to materialize.

Fujitsu Limited and Polaris Capital Group Co., Ltd., today announced that they have concluded a contractual agreement for Fujitsu to transfer shares in Fujitsu Connected Technologies Limited, a consolidated subsidiary of Fujitsu, as well as shares in a new company that will take over the mobile device business (company factories) of Fujitsu Peripherals Limited, to a new company (the “successor company”) that Polaris will establish. The two companies aim to complete the share transfer by the end of March 2018.1. Background and Purpose of the TransferAs the mobile device business has become increasingly commoditized, competition among global vendors has intensified. In light of this environment, in February 2016 Fujitsu performed a Company split of Fujitsu Connected Technologies as a wholly owned subsidiary handling the mobile device business, thereby clarifying management responsibilities and building a structure that could accelerate management decision-making and pursue thorough streamlining. Now, in order to accelerate the development of Fujitsu Connected Technologies’ next-generation devices geared toward the era of 5G and IoT, as well as the development of new service businesses, Fujitsu has made a management decision to transfer shares in Fujitsu Connected Technologies to Polaris. This management decision represents an even higher level of autonomy for Fujitsu Connected Technologies. In line with this, it will become possible to conduct business operations that leverage to the maximum extent Fujitsu Connected Technologies’ relationships of trust with communications companies nurtured over many years, its brand strength cultivated through devices catering to the needs of seniors, and a broad range of technological prowess (wireless, biometric authentication, security and other basic technologies, as well as power saving and thermal control technologies). At the same time, with regard to Fujitsu Peripherals’ company factories that handle the development, manufacture and repair of ubiquitous products including mobile devices, Fujitsu decided to conduct a Company split in order to expand its original design manufacturing (ODM) and electronics manufacturing services (EMS) businesses as independent business entities, and to transfer those shares to Polaris. Polaris believes that these businesses hold the potential for further growth, given the strengths of such brands as the Raku Raku smartphone series, which enjoys overwhelming support from seniors, the perennially popular arrows smartphone series, and also the highly advanced technological expertise that supports the development of such products. In addition, the building of new businesses that utilize the Raku Raku Community, one of Japan’s premier social networks catering to seniors, and other initiatives will also enhance future growth. Polaris has experiences in multiple projects of manufacturing, IT and mobile business, as well as large company carve-out-type projects. Armed with the knowledge and experience cultivated in these projects, it will smoothly and rapidly build the structure necessary for an independent business, while maintaining a firm hand on the strengths and unique characteristics of these businesses. Specifically, the company aims to maximize the corporate value of these businesses by positively supporting a growth strategy centered on such pillars as investing in the development of new technology with an eye toward the era of 5G and IoT, expanding the revenue base through a variety of alliances and strategic M&A, delivering new products and services focused on the next generation, and expanding the EMS business.2. Overview of the TransferFujitsu will set up a new company called Japan EM Solutions Limited, which will take over Fujitsu Peripherals’ mobile device business. In addition, the Raku Raku Community SNS for seniors will be handed over to Fujitsu Connected Technologies. Fujitsu will then transfer shares of both Fujitsu Connected Technologies and Japan EM Solutions to the successor company, and under the new structure will retain for itself 30% and 19%, respectively, of Fujitsu Connected Technologies and Japan EM Solutions shares. Even after migration to the new structure, Fujitsu Connected Technologies will continue to offer products under the telecommunications carrier-focused Raku Raku and arrows brands, as well as products in its own in-house brands. Fujitsu Peripherals will conduct ODM business with regard to the development and manufacturing of printers as well as a variety of manufacturing equipment, as a wholly owned subsidiary of Fujitsu.